FEDERAL COURT OF AUSTRALIA

Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2012] FCA 558

THE COURT ORDERS THAT:

1.    The proceedings stand over for further directions at 9:30 am on 28 May 2012.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    These proceedings have their genesis in events that occurred six years ago in about mid 2006. Then, a number of employees of Optiver Australia Pty Ltd, left to start up a new competing enterprise, conducted through Tibra Trading Pty Ltd. The various respondents are, or were at relevant times, associated with Tibra (the Tibra parties). Both Optiver and Tibra engage in the business of derivatives trading or proprietary arbitrage in respect of securities on different securities markets in Australia and overseas. A brief history of the broad nature of the dispute is given in the Full Court’s reasons for upholding Optiver’s claim to be entitled to preliminary discovery: Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435.

2    In mid 2007 Optiver commenced proceedings in the Court for preliminary discovery against Tibra and certain of its associates. Following the grant of preliminary discovery Optiver and its associated company, Optiver Trading Pty Ltd (collectively, Optiver), commenced these proceedings in 2009. In essence, Optiver alleged, and the Tibra parties denied that:

    the Tibra parties had taken from Optiver a copy of all or a substantial part of the computer program Optiver used to conduct its business;

    14 collections of Optiver source files for their computer program were copied by the Tibra parties in breach of the Optiver parties’ copyright derived from the Copyright Act 1968 (Cth);

    the Tibra parties used confidential information of Optiver in breach of confidentiality obligations owed to Optiver in contract or in equity;

    the Tibra parties used a copy of Optiver’s computer programs that they had made before leaving Optiver’s employ or copied a substantial part of them in order to write, compile or produce the source code for the Tibra parties’ computer programs or a substantial part of them, either in breach of copyright or confidentiality obligations owed to Optiver.

3    The Optiver parties, in seeking to establish their claims of breaches of obligations of confidence or of copyright, contend, and the Tibra parties deny, that the Tibra parties engaged in fraudulent conduct and have given untrue accounts of how the Tibra parties’ computer programs were created.

How the present issue arose

4    On 22 October 2010, Emmett J ordered a separate hearing of any question as to the quantum of damages to be paid by the Tibra parties or any account of profits to occur after the determination of all other issues in the proceedings. This order was varied on 26 October 2011 when Flick J made an order by consent postponing to a later date a number of other issues. I will refer to the issues to be determined first in these reasons as “the proceedings”, although that is not strictly correct. On 15 July 2011, Emmett J fixed the trial of the proceedings to commence on 4 June 2012. Since then two judges of the Court based in Sydney retired and advertisements for their replacement were placed by the Attorney-General in late October 2011. The proceedings were placed in my docket when no such appointments had been announced by mid February 2012. I have undertaken some case management in the proceedings since.

5    The proceedings have been hard fought and each side has invested very large sums of money in preparing for the hearing. Significant expert evidence has been filed by each side. The Optiver parties contemplate calling about 19 witnesses, including four experts. Twelve of those witnesses will be computer programmers who wrote parts of the Optiver computer programs the subject of the proceedings. The Tibra parties anticipate calling about 13 witnesses including four experts and predict that something in the order of two weeks of hearing time will be necessary for the concurrent expert evidence. The expert evidence is contained in about nine lever arch volumes. During the course of argument on 18 May 2012, Optiver stated that one of its experts, Professor Zobel, will be unavailable after 20 July 2012 for some time because of his need to undergo surgery.

6    In substance, the actual contest between the parties ranges very broadly indeed. First, there are disputes as to whether several former employees of the Optiver parties were involved in taking a copy of the Optiver computer programs and used that copy to produce Tibra’s computer programs for the purposes of starting up its business later in 2006. These matters involve claims by the Optiver parties, denied by the Tibra parties, of significant dishonesty on the part of the Tibra parties concerned. Secondly, in order to establish whether any of the Tibra computer programs were copied from the Optiver computer programs, it will be necessary to examine those programs, somewhat minutely, by comparing source codes and many lines of code for the purposes of ascertaining whether the Optiver parties are able to establish their case that the Tibra parties copied Optiver’s computer program or misused its confidential information. Part of the process of seeking to establish or deny this allegation will involve evidence from 12 Optiver programmers, several of the Tibra parties and Tibra employees. That will be needed to determine, among other things, how long it took the original authors to write the relevant parts of the Optiver source codes that are said to be critical to Optiver’s program and to have been copied or in some way misused by the Tibra parties in producing the Tibra parties’ program. In addition, this will involve the Tibra parties’ witnesses being examined on the same lines in relation to their authorship of Optiver’s computer programs (when or if employed by Optiver) and subsequently when they wrote the impugned portions of the Tibra computer programs. The eliciting of this evidence particularly in cross-examination, will be of considerable detail and complexity. I am satisfied that it will take a great deal of time, even though the evidence-in-chief of the 12 Optiver programmers is said to be brief.

7    Because of the common position that Optiver is substantially alleging that the Tibra parties committed a fraud on it when creating the Tibra computer programs, I directed that the evidence-in-chief of those persons and other witnesses of fact should be given orally. Originally, I contemplated that the 12 Optiver programmers would be giving unchallenged evidence by either an agreed statement of facts or affidavit. However, this position changed when the Tibra parties indicated that there were substantive issues to which this evidence was directed that they wished to challenge and subject to cross-examination.

8    The parties gave Emmett J an estimate of eight weeks for the hearing of the proceedings when he fixed the trial to commence on 4 June 2012. During the directions hearings I sought to have the parties make an agreed statement of the principal issues in a document of no more than one page. However, no agreement was reached initially and the Tibra parties then raised their intention to cross-examine the 12 Optiver computer programmers. Neither party could be certain that the proceedings would be completed within the eight weeks for which they were set down.

9    At a directions hearing on 4 May 2012, among other things, I dealt with the way in which objections to the expert evidence might be approached but concluded that this had to be left for the trial when the issues would be clearer. On that occasion, I suggested that these proceedings might be suitable for a referral under s 54A(1) of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) to a referee who was a retired judge of the Court. The Optiver parties opposed, and the Tibra parties consented to, the appointment of a former judge of the Court and President of the Copyright Tribunal, the Hon Kevin Lindgren QC, as referee under s 54A(1), to hear and determine the proceedings.

10    A question of principle thus arises to whether it may be appropriate to exercise the new power conferred by s 54A(1) in the circumstances, over the opposition of the Optiver parties. Given that the proceedings are very unlikely to conclude in the eight week hearing time, it is essential to formulate a procedural mechanism that will achieve the just resolution of the dispute according to law and as quickly, inexpensively and efficiently as possible.

Statutory Scheme

11    Relevantly, ss 39, 40, 54A and 54B of the Federal Court Act provide:

“39    Civil trials to be without jury

In every suit in the Court, unless the Court or a Judge otherwise orders, the trial shall be by a Judge without a jury.

40    Power of Court in civil proceedings to direct trial of issues with a jury

The Court or a Judge may, in any suit in which the ends of justice appear to render it expedient to do so, direct the trial with a jury of the suit or of an issue of fact, and may for that purpose make all such orders, issue all such writs and cause all such proceedings to be had and taken as the Court or Judge thinks necessary, and upon the finding of the jury the Court may give such decision and pronounce such judgment as the case requires.

…

54A    Referral of questions to a referee

(1)    Subject to the Rules of Court, the Court may by order refer:

(a)    a proceeding in the Court; or

(b)    one or more questions arising in a proceeding in the Court;

to a referee for inquiry and report in accordance with the Rules of Court.

(2)    A referral under subsection (1) may be made at any stage of a proceeding.

(3)    If a report of a referee under subsection (1) is provided to the Court, the Court may deal with the report as it thinks fit, including by doing the following:

(a)    adopting the report in whole or in part;

(b)    varying the report;

(c)    rejecting the report;

(d)    making such orders as the Court thinks fit in respect of any proceeding or question referred to the referee.

54B    Protection of referees

A referee has, in inquiring or reporting on a proceeding or question referred under section 54A, the same protection and immunity as a Judge has in performing the functions of a Judge.”

12    In considering whether or not to exercise the discretion under s 54A(1) and to provide for the future management of the proceedings, the provisions of s 37M of the Federal Court Act are also relevant. That section provides:

“37M    The overarching purpose of civil practice and procedure provisions

(1)    The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a)    according to law; and

(b)    as quickly, inexpensively and efficiently as possible.

(2)    Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a)    the just determination of all proceedings before the Court;

(b)    the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)    the efficient disposal of the Court’s overall caseload;

(d)    the disposal of all proceedings in a timely manner;

(e)    the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

(3)    The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.

(4)    The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:

(a)    the Rules of Court made under this Act;

(b)    any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court.”

13    Division 28.6 of the Federal Court Rules 2011 (Cth) deals with referrals by the Court to a referee. Under r 28.65(1) a party may apply to the Court before or after an inquiry has started for directions about how the inquiry should be conducted or any matter arising in the inquiry. A referee must conduct an inquiry in accordance with any directions made by the Court but, in the absence of such directions may conduct the inquiry in any way the referee think fits (r 28.65(2) and (3)). In the inquiry, a referee is not bound by the rules of evidence but may be informed in any way the referee thinks fit (r 28.65(4)). The referee can fix a time for each party to provide him or her with a brief statement of the findings of fact and law contended for by the party (r 28.65(7)). Each party to the inquiry must do all things required of the party by the referee to enable the referee to form an opinion about the matter and not wilfully do, or cause to be done, any act to delay or prevent the referee forming an opinion (r 28.65(8)).

14    The referee must give the Court a written report about the matter referred to him or her that has attached to it the statements given to the referee by the parties under r 28.65(7) setting out the referee’s opinion on the matter and the referee’s reasons for that opinion (r 28.66). After a report has been given to the Court, a party may ask to the Court to adopt, vary or reject the report in whole or in part. The Court may also require an explanation by way of a further report by the referee or remit for further consideration by the referee the whole or any part of the matter that had been referred to the referee for inquiry or report (r 28.67(1)). Additionally, a party may ask the Court to:

“(d)    decide on any matter on the evidence taken before the referee, with or without additional evidence;

(e)    give judgment or make an order in relation to the proceeding or question.” (r 28.67(1)

15    Further, r 28.67(2) provides that a party must not adduce, in the Court, evidence given in an inquiry. However, that subrule must be subject to the power of the Court itself, under r 28.67(1)(d), to decide any matter on the evidence taken before the referee with or without additional evidence. Thus, the Court can give leave to the parties to put before it the whole of the evidence given in the inquiry for the purposes of determining an application to decide any matter.

Legislative history of s 54A of the Federal Court Act

16    Section 54A of the Federal Court Act was enacted as part of the Federal Justice System Amendment (Efficiency Measures) Act 2009 (Cth). The Bill for that Act had been introduced into the Parliament by the Attorney-General the previous year. In his second reading speech (Hansard, House of Representatives, 3 December 2008 at 12296) the Attorney-General said:

“Court efficiency is important if we are to ensure that the cost of justice remains proportionate to the relief being sought. In troubled economic times, it is also important that commercial disputes be resolved as expeditiously and economically as possible.

An important measure introduced by this bill is a power to refer all or part of a proceeding in the Federal Court to a referee for report. Such a power is regularly used by courts in other jurisdictions to assist them to determine issues that are before them. It will allow the Federal Court to appoint an appropriately qualified person to inquire into any aspect of a proceeding and provide a report to the court.

This is an important reform and will enable the court to more effectively and efficiently manage large litigation.

It will be particularly useful in many cases, such as those involving complex technical issues or where detailed examination of financial records is necessary to assess damages. It will also be of assistance in native title matters where a judge could be assisted by an inquiry into a particular aspect of the claim.

The procedural flexibility with which a referee can deal with a question—along with their technical expertise—will allow a referee to more quickly get to the core of technical issues and reduce the cost and length of trials for litigants.” (emphasis added)

17    The explanatory memorandum for the Bill explained that s 54A gave the Court a wide range of powers to make rules of court to develop flexible procedures for the Court’s use of referees and continued:

“This will be useful in many cases, including where technical expertise is required and it is neither cost effective nor an appropriate use of a judge’s time to gain the necessary in-depth expertise in a particular science or trade, or where detailed examination of accounts or other financial records is necessary to assess damages. It will also assist the Court in its management of complex native title matters. Courts in other jurisdictions possess and regularly use such a power to help them determine issues before them. Matters referred to a referee could be matters of fact or law or both.” (emphasis added)

Optiver’s submissions

18    Optiver argued that the Court ordinarily must exercise the jurisdiction conferred on it, and that when an applicant commences proceedings in the Court it does so with the general understanding and expectation that a judge of the Court will hear its claims. It referred to a “history of judicial opposition to the use of references without the agreement of both parties”, commencing with Longman v East (1877) 3 CPD 142 and a number of Australian Supreme Court cases such as Honeywell Pty Ltd v Austral Motors Holdings Ltd [1980] Qd R 355 at 359; Bold Park Senior Citizens Centre & Homes Inc v Bollig Abbot and Partners (Gulf) Pty Ltd (1998) 19 WAR 281 at 285; Abigroup Contractors Pty Ltd v BPB Pty Ltd [2000] VSC 262.

19    Optiver argued that there was a clear difference between a litigant not being entitled to have a judge decide all issues of fact and law that arise in litigation and a litigant not being entitled to have any questions of fact or law decided by a judge. It contended that no particular technical issues were proposed to be isolated for determination on a reference. Optiver argued that it would be futile to isolate the technical issues upon which the experts have opined because they were inextricably linked to the other evidence, and accordingly the credit, of the Tibra witnesses. It argued that the effect of the proposed reference would simply be to “delegate all findings of fact and law to a referee”. Optiver emphasised that its allegations against the Tibra parties were tantamount to fraud. It argued that in such cases it was inappropriate to refer matters to a referee. It argued that references were made rarely in cases involving fraud, particularly over the opposition of a party.

20    Optiver also argued that the proceedings had attracted what it described as “considerable” publicity. It referred to 13 instances spread over five and a half years including two publications each in The Australian and the Sydney Morning Herald and three in Business Review Weekly. It argued that proceedings before a referee did not have to be open to the public and that it was in the interests of justice for members of the public to be able to look at or observe the cross-examination of the Tibra witnesses whose integrity Optiver impugned. Next, it argued that a referee’s report would not be made publicly available and thus the public vindication of Optiver’s allegations, or the Tibra parties’ defences, would not be assured. Optiver also argued that the Court should not assist a party to prevent public scrutiny of the Tibra parties’ impugned conduct.

21    Optiver also argued that a reference would fundamentally alter the parties’ rights of appeal in relation to the referee’s findings of fact. It contended that the use of a referee would prevent a re-hearing of the issues of fact that the referee decided, unlike the usual position when an appeal was taken to the Full Court from findings of a single judge of the Court after a trial.

22    Optiver also argued it was relevant to consider whether a reference would occasion additional costs of significance or was likely to save costs. It contended that every step it had taken in the proceedings since they commenced had been on the assumed basis that a judge of the Court would hear and determine the evidence and resolve the legal issues raised by its claims. It contended that it was now too late, immediately before the date fixed for trial, to alter, over its objection, what it said was a fundamental aspect of the proceedings. It contended that a reference would not save any time or costs but rather would be productive of further disputes and cause further costs and delay. It contended that the case should continue to be heard by me, having regard to the role I had assumed in managing proceedings for trial.

23    Optiver argued that a reference would also create further avenues for dispute outside the reference itself, namely first, issues concerning directions that should be given under r 28.65 before and after the inquiry had started, and secondly, the various issues that might arise on the application for the Court to adopt, vary or reject the referee’s report in whole or in part. It also contended that the referee would lack the power to deal with some of the conflicts between the parties and that a reference would introduce further opportunity for new contested applications “between the parties who have had a history of long and vigorous disputation”. Optiver argued that a reference would raise the spectre of parallel proceedings during the inquiry, namely those before the referee and proceedings in the Court seeking directions under r 28.65(1).

24    Optiver accepted that the proposed referee was an eminent jurist of high standing and possesses expertise in copyright law. He certainly is a person with those attributes. However, Optiver argued that there was nothing in the proposed referee’s expertise to suggest that he had any particular skills or expertise in the area of computer code writing. It argued that expertise in a particular area, the subject of a reference, was a typical feature of the appointment of referees, and it relied on the use of persons such as qualified structural engineers, in building cases in Supreme Courts. Optiver argued that there would be potentially unnecessary duplication between the functions of the referee and the judge when an application to adopt, vary or reject the report was made in relation to questions of statutory construction as to whether the facts as eventually found fall within a relevant provision of the Copyright Act. It contended that these issues were whether:

    the 14 sets of source files put forward by Optiver as “computer programs” each constituted “a set of statements or instructions to be used directly or indirectly in the computer in order to bring about a certain result” within the meaning of s 10(1) of the Copyright Act;

    any of those 14 computer programs constituted a “work of joint authorship” within the meaning of s 10; and

    any part of the programs found to have been taken by the Tibra parties constitute a “substantial part” of the Optiver programs within the meaning of the Act.

25    Optiver also argued that the referee would have to apply legal standards to the established facts having regard to the defences pleaded by the Tibra parties that any parts of the Optiver source code that may be found to have been taken by them were not subject to any enforceable equitable or legal obligation within the principles identified in Maggbury Pty Ltd v Hafele Pty Ltd (2001) 210 CLR 181. Accordingly, Optiver argued that, effectively, there would be two hearings at first instance in relation to legal issues at the heart of the case, one performed by a former judge of the Court and another by a current one. It contended that this would undermine any suggestions that the reference would be efficient or achieve the overarching purpose in s 37M of the Federal Court Act.

The Tibra parties’ SUBMISSIONS

26    The Tibra parties joined issue with substantively all of the Optiver parties’ submissions. They argued that the purpose for which s 54A of the Federal Court Act was introduced was to ensure that the efficient use of judicial resources in the circumstances set out in the passage from the explanatory memorandum that I have quoted above. They contended that the approach of courts in earlier years to the use of reference powers has now evolved to the point where, in Talacko v Talacko [2009] VSC 98 at [27], Kyrou J had denied that special or exceptional circumstances were necessary to overcome the absence of consent to a reference by one party. The Tibra parties argued that the Federal Court Act did not limit the Court’s power to make an order under s 54A if one party opposed a reference and that times had moved on since 1877 when Longman 3 CPD 142 had been decided.

27    The Tibra parties argued that Optiver’s case was largely based on expert evidence involving a comparison of portions of the two sides’ source codes. They noted that most of Optiver’s expert reports were the subject of confidentiality claims and that claims of confidentiality would be made during the course of cross-examination and over other parts of the evidence during the hearing. Indeed, it was common ground that a substantial part of the proceedings would have to be conducted either in closed court or, if in open court, obliquely so that any confidential information the subject of the evidence would not be disclosed to an observer of the proceedings.

28    The Tibra parties argued that the trial will involve an examination of a considerable number of particular lines of source code, headings in the source code and the functions which the lines and source headings performed. This would be required so as to determine whether these aspects of the Tibra computer programs reflected copying or not. In order to be able to undertake this examination, the tribunal of fact, so the argument ran, would need to obtain a detailed understanding of the nature of C ++ programming language, the nature of the relevant parts of both the Optiver and Tibra source codes, the functions each performed and the potential alternative ways of performing the same or similar functions. The latter understanding would be relevant to making a determination of whether or not what appeared in the Tibra parties’ source code reflected copying or merely writing of a code to perform the same functions that would typically be performed by any code written for a participant in the businesses each of the two competing sides conduct. The Tibra parties also argued that this material would be relevant to determining whether what the Tibra parties characterised as a “relatively small” portion of the Optiver and Tibra codes could constitute a “substantial part” of any relevant copyright work or constitute confidential information, having regard to the functions that they served, the likely public knowledge of the need for such functions and their alleged simplicity.

29    In addition, the Tibra parties argued that the case would occupy considerable hearing time, and that recently Optiver had indicated that it wished to rely on a new witness of fact it had subpoenaed (a Mr Muirhead who had previously worked at Tibra) and two additional expert reports prepared by one of its existing experts. The Tibra parties served an additional expert report from one of their experts, Dr Wilson, but I held on 18 May 2012, that by reason of the lateness of that report and its subject matter the Tibra parties should not be permitted at this stage to rely upon it.

30    The Tibra parties argued that there was no entitlement for a party to have its case heard by a judge rather than a referee, pointing to the existence of the power in s 54A. They accepted that the present proceedings involved allegations that were tantamount to fraud and that this might have been a reason against referral had they, as the persons accused of the fraud, opposed a reference. The Tibra parties also noted that this should not be an issue on which much weight could be placed given the experience of the proposed referee. They argued that it would be inevitable that the Court would be opened and closed on repeated occasions causing inconvenience in itself that would not be experienced before a referee.

31    While the Tibra parties accepted that the hearing for the adoption, variation or rejection of the referee’s report would impose an additional step, it was a step inherent in every reference out made by the Court. The Tibra parties also argued that because a tribunal of fact will need to make findings based on the credibility of witnesses, it was unlikely that any substantial impact would be felt by a party on appeal were findings made by a judge or a referee. They argued that it would be unlikely that an appeal court could place itself in the same position as the tribunal of fact, be he or she a referee or a judge, to review those credibility findings. The Tibra parties also noted that whoever was the tribunal of fact would have to acquire an understanding of the C ++ programming language, the way in which the various trading operations of each business the parties’ conducted worked, a familiarity with the lengthy and detailed expert reports, and undertake a detailed examination of “hundreds if not thousands of lines of source code” to decide whether or not to accept one or other side’s explanations or contentions as to any similarities that were identified.

32    The Tibra parties also argued that because the referee had power under r 28.65(3) to conduct the proceedings on the reference in any way the referee saw fit, the prospect of the parties seeking to go over the referee’s head was remote.

Principles applicable to the exercise of power to order a reference under s 54A

33    The starting point for determining whether to order a reference is s 39 of the Federal Court Act. That prescribes that unless the Court otherwise orders, a trial in this Court should be by a judge without a jury. Importantly, s 39 must be read with the Act as a whole. That reading must have regard to the wording of the Act as it now is, as opposed to when ss 39 and 40 were first enacted, as providing for the then two only possible modes of trial: i.e. by judge or by judge and jury.

34    The provisions of s 39 evince a legislative policy for a trial by a judge as the usual mode of trial, as I explained in Ra v Nationwide News Pty Ltd (2009) 182 FCR 148 at 155 [23]-[26]. However, when s 54A was enacted in 2009 the Parliament expanded the available modes of trial in the Court to include a trial by a referee. That section creates a power to order a reference to a referee of the whole of a proceeding as well as one or more questions arising in a proceeding. The referee must conduct the inquiry and report in accordance with the Rules. Significantly, s 54A(1) does not contain the qualifying words in s 40 that the discretion it creates can be exercised in “any suit in which the ends of justice appear to render it expedient to do so”.

35    The discretion in s 54A(1) is one that must be exercised judicially, having regard to the subject matter, scope and purpose of the Federal Court Act itself: R v Australian Broadcasting Authority; Ex parte 2HD Pty Ltd (1979) 144 CLR 44 at 49-50 per Stephen, Mason, Murphy, Aickin and Wilson JJ. Thus, factors to which the Court ordinarily would have regard in considering the exercise of the power to order a reference under s 54A(1) are:

(1)    the policy that the usual mode of trial is by judge alone: s 39;

(2)    the overarching purpose of the Court’s civil practice and procedure rules and the factors referred to in s 37M so far as they are relevant to the exercise of the discretion;

(3)    the legislative purpose for the recent introduction of the additional mode of trial for which s 54A provides.

36    An important principle of statutory construction is that it is quite inappropriate to read provisions, such as s 54A(1), that confer jurisdiction or grant powers to a court, by making implications or imposing limitations which are not found in the express words: Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 421 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. The grant of power in s 54A is not confined to any particular situation, category of litigation or otherwise. However, other provisions in the Federal Court Act, such as ss 37M and 39, may affect the way in which the power in s 54A(1) may be or should be exercised. That is because of the initial policy expressed in s 39 and the subsequent decision of the Parliament in 2009 to broaden the modes of trial available in the Court. As the Court said in 2HD 144 CLR at 50:

“However, it is not a legitimate approach to interpretation to compare a statutory discretion which is expressed in unlimited terms as to one subject with another discretion in the same statute which is confined to specified considerations with reference to a different subject and thereby conclude that the first discretion necessarily excludes the considerations specified in relation to the second discretion. The general rule is that a discretion expressed without any qualification is unconfined except in so far as it is affected by limitations to be derived from the context and scope and purpose of the statute. The fact that a discretion relating to a different subject matter is confined to a particular consideration provides no rational reason for saying that another discretion expressed without qualification does not embrace that particular consideration.” (emphasis added)

37    The condition contained in s 40 requires the Court to have regard to whether the ends of justice render trial by jury expedient. Thus, the Court can consider whether the use of a jury would better conduce to a just result in a particular case, such as one involving a claim in defamation raising questions about community standards together with traditional conceptions and values that arise in clashes between the rights to reputation and freedom of expression in a democratic society. Section 54A(1) does not confine the discretion to order a mode of trial other than by judge alone under s 39 in the same way as s 40. Rather, s 54A(1) recognises that the Court can avail itself of another mode of trial that does not involve a judge at all. Both ss 39 and 40 require a judge to preside at a trial throughout, whereas s 54A(3) confines the role of a judge to considering whether and to what extent the report of the referee should be adopted after an inquiry in which the judge does not preside.

38    In Buckley v Bennell Design & Constructions Pty Ltd (1978) 140 CLR 1 at 15 Stephen J explained that the character of a reference by the Court to a referee was as follows:

“As Mr. Quintin Hogg, as he then was, said in Law of Arbitration (1936), p. 193, such a reference “is a species of trial, and the decision is now equivalent to a form of judgment or verdict and not an award”. In such a reference the court's procedures of adjudication are not abandoned in favour of extra-curial settlement of the dispute by arbitration. Instead the court directs that, for the better resolution of the particular proceedings initiated before it, resort should be had to this special mode of trial which the legislation has made available.” (emphasis added)

39    Stephen J described the reference powers of the Court as “procedural tools for the trial of issues or of whole cases” that were distinct from conventional arbitration. That was because references were conducted subject to Rules of Court by persons deemed to be officers of the Court and whose decisions were subject to judicial review (140 CLR at 20-21; see too per Jacobs J at 36-37, Murphy J and Aickin J at 39).

40    An important decision in this area is that of the Court of Appeal of the Supreme Court of New South Wales in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549. There, Gleeson CJ, with whom Mahoney and Clarke JJA agreed, said (29 NSWLR at 558C-D; see too at 567E-G per Mahoney JA):

“There is a danger in seeking to resolve the present problem by relying upon broad generalisations which pay insufficient regard to the particular context. The proposition that all litigants are entitled to have a judge (or, presumably, a master) decide all issues of fact and law that arise in any litigation, is unsustainable. It ignores the existence, in many civil cases, of trial by jury.” (emphasis added)

41    The Court ought have no predisposition in making or refusing to make an order for a reference to a referee depending on the wishes of one party, though it will be cautious in doing so over the opposition of all parties: Park Rail Developments Pty Ltd v RJ Pearce Associates Pty Ltd (1987) 8 NSWLR 123 at 129G per Smart J. Importantly, under r 28.67(1)(d), this Court can decide any matter on the evidence taken before the referee with or without additional evidence, despite what would otherwise be the inhibition on adducing the evidence given in an inquiry imposed by r 28.67(2). This indicates that the Court has power, in an appropriate case, to allow the parties to use before it the evidence that had been before the referee, when considering whether or not to adopt, vary or reject the report under r 28.67. However, it is not necessary to consider in these reasons in what circumstances the Court will relax the prima facie position in r 28.67(2) against the use in the Court of the evidence taken in an inquiry.

Consideration

42    The present proceedings have been hard fought. The parties are entrenched in their positions in the litigation. I am satisfied that the estimate of eight weeks for the hearing as currently proposed will be exceeded. There is a substantial likelihood that the proceedings will run considerably over that estimate. The Tibra parties have indicated that the expert evidence, even taken concurrently, will proceed for two weeks. The joint expert reports indicate that there are substantial areas on which the experts disagree that will require detailed examination of the bases on which they have expressed their opinions. And that is after dealing with many objections. One issue of significance between the experts is how long it would take to write parts of the source codes concerned. In order to arrive at an evaluation of those facts, I anticipate that there will be detailed cross-examination of the 12 authors of the Optiver codes who will give what would otherwise would have been relatively formal evidence as to their authorship and such originality or other features of the work as would be relied by the Optiver parties to establish their copyright or confidentiality claims. The Tibra parties are likely to challenge each of those bases, but pay particular attention to the time it took to write the relevant parts of the Optiver codes.

43    This issue is significant, as I understand the proceedings at the moment, because Optiver contends that the time in which the Tibra source codes were created was so short that they must have been copied. The experts have given significantly different opinions and estimations of how long it would take to write particular parts of the codes. They have examined how long it took to write or create particular parts of the Tibra source code. In addition, each of the individual Tibra parties or employees who will be called to give evidence is likely to be the subject of searching a cross-examination not merely upon the authorship of the portions of the Tibra source codes for which those persons might have been responsible, but also the circumstances in which the code came to be created and the allegations which Optiver wishes to put as establishing fraud. A tribunal of fact will have to become familiar with the C ++ programming language which will also take time. There is no necessity for a judge to do this rather than a referee.

44    Both parties accept that there will be substantial parts of the hearing that will need to be conducted either in closed court or obliquely, if in public, so that matters currently alleged to be confidential to one or other side are not disclosed in open court to a competitor or third parties. In Pobjie Agencies Pty Ltd v Vindex Tubemakers Pty Ltd [2000] NSWCA 105 at [36]-[44] Mason P, with whom RP Meagher and Handley JJA agreed, dealt with an argument based on findings of fraud made by a referee without suggesting that a reference was an inapposite vehicle in which such allegations could be tried. Einstein J subsequently observed that, in general, there were particularly strong reasons why a court would not refer out questions of fraud except in exceptional circumstances: CPC Energy Pty Ltd v Bellevarde Construction Pty Ltd [2006] NSWSC 1120 at [22].

45    However, s 54A(1) contains no bar to a reference of any matter pending in the Court. Where, as here, the proposed referee is an eminent former judge, the considerations that might inhibit a reference were the referee an engineer or non-lawyer, are less powerful. Moreover, a substantial part of the evidence here will be taken either in closed court or in circumstances where the subject matter of the evidence is, or is claimed to be, confidential. Thus, the need for the proceedings to be in open court because they involve allegations of fraud is less significant, since the manner in which much of the critical evidence will be adduced or cross-examined on will leave an observer or member of the public in the dark as to what the points being made are.

46    In my opinion, such oblique cross-examination as will need to be conducted on this material would make it difficult for a third party to follow the proceedings and so be able to derive any understanding of what concessions or assertions a witness was making about a subject matter that was not otherwise transparent. In addition, the existence of significant amounts of material over which claims for confidentiality are asserted will make it likely that substantial parts of the trial will need to be held in closed court.

47    The issues in the proceedings are highly complex and technical. They will require a tribunal of fact to immerse itself in them, the more so because the allegations of fraud are linked to the creation of the computer codes. Thus, the proceedings are apt to be referred under s 54A(1) to a referee. It would be undesirable for any substantial adjournment of the hearing to take place at the conclusion of the eight weeks. The task of preparing a judgment or a reasoned report arriving at findings of fact and law will in any event be very considerable, given the large and detailed evidentiary landscape, the factual and legal contest and the desire of each party to leave no stone in the litigation unturned. Any substantial break in the hearing would make that task more difficult. The issues in the proceedings are very significant for the parties. Most of the issues of law and statutory construction will need to be determined in light of detailed factual findings. It is likely that whether an appeal were by way of rehearing from a decision of a judge, or after an intermediate step of a more confined kind in a decision to adopt, vary or reject the referee’s report, it would be unlikely that an appellate court would be able to put itself in a position of being able to reverse the tribunal of fact on findings of fact.

48    I reject Optiver’s argument that parties are entitled to come to the Court with a general understanding and expectation that a judge will hear and determine their claims so as to confine the discretion which the Parliament determined to confer on the Court in s 54A(1). The submission misunderstands that the Court is exercising the jurisdiction conferred on it by utilising a power that the Parliament has granted for the trial of matters. Optiver’s argument seeks to impose an unstated limitation or implication that is not found in the express words in s 54A(1): Shin Kobe Maru 181 CLR at 421. Moreover, there is no evidence that it would be substantively more expensive to appoint a referee. Regard must be had to the fact that the parties must pay, on the one hand, significant daily hearing fees, set by the executive government, for a Court hearing or, on the other hand, fees of the referee and for, or in respect of, the hearing of the proceedings. Moreover, the resources of the Court are not infinite and cannot necessarily be made available in lieu of other modes of trial when litigation subsequently expands beyond earlier estimates given for hearing dates. As Gleeson CJ pointed out it is unsustainable to contend that all litigants are entitled to have a judge decide all issues of fact or law in a case: Super Pty Ltd 29 NSWLR at 558.

49    Moreover, s 54A(1) authorises, in express terms, the whole of the proceedings to be referred out as well as some part of them. Any reference in this case would be of the issues that have been ordered to be tried by Order 7 of 22 October 2010 and Order 1 of 26 October 2011. The trial before the referee could proceed without damaging the principles of open justice. Indeed, the terms of s 54A contemplate that a referee may conduct the hearing as he or she sees fit. In a case such as the present, where a substantial amount of the evidence will be either confidential or obscure to an observer, a reference may be appropriate mode of trial. The referee’s report is likely to become publicly available, subject to any confidentiality order, when the Court is asked to act on the report.

50    The spectre that the Optiver parties raised of parallel proceedings before the Court and referee ignores the fact that the Federal Court Act contemplates, that while the reference will be in the control of the Court, ordinarily, parties should not be allowed to challenge the conduct of the reference whenever the referee rules against them in some particular way during its course. So much is plain from r 28.65(8) and s 37M. That is particularly so in a case where the referee would be a former judge of the Court, well able to apply the rules of evidence, practice and procedure in a manner calculated to produce a fair and just resolution of the dispute in accordance with law. Ordinarily, the appropriate time and forum for disputing what decisions have been made by the referee will be when an application is made for adoption, variation or rejection of the report. When such an application is made, the report will be before the Court and, ordinarily, the principles of open justice would make the whole of the report available for public scrutiny, subject to any parts of it that might be made the subject of an order under ss 17(4) or 50 of the Federal Court Act to keep it confidential.

51    For these reasons, I am satisfied that, subject to the opportunity I will offer to the parties to reshape or reschedule the hearing, the proceedings should be referred to a referee for hearing commencing on 4 June 2012.

Conclusion

52    If the parties can craft an agreement limiting the time for evidence and submissions so as to ensure that the hearing will finish in the allotted eight weeks, the hearing can proceed in the Court. However, I do not consider that I can impose time limits with sufficient assurance that they would be appropriate or just since I am not nearly as familiar as the parties with the evidence or issues that they will need to explore with the many witnesses. If no such agreement can be reached, then I am not prepared to embark on a hearing that I am satisfied cannot realistically be expected to conclude in the eight weeks allotted.

53    These proceedings involve complex technical issues enmeshed with allegations of fraud and have at the moment, an indeterminate length. It is not desirable to adjourn the trial (or reference) after the eight weeks for which it is set down. The hearing of these proceedings should proceed as continuously as practicable till it is finished.

54    If the parties are unable to agree upon a limitation on the length of evidence-in-chief, cross-examination, the concurrent evidence of the experts and submissions so as to be able to limit the hearing to the eight weeks that have been set aside and they wish to retain the hearing dates, then in my opinion they will need to consent to a reference, with the proviso that the reference will continue to run until it is completed before the referee, without any unnecessary interruptions. Alternatively, the parties can elect to have a hearing in the Court early next year when, again, the hearing will continue until it is finished in its entirety. It is unfortunate that this step has to be taken as late as now. But that has been brought about, in part, because as I have been managing proceedings, it has become apparent that the length of the hearing, and the amount of cross-examination that is likely to occur has made it highly probable that well over eight weeks will be required to conclude the hearing (unless the parties are able to agree upon limitations as to their evidence and submissions).

55    The proceedings should stand over so that the parties can inform the Court when they are in a position to identify that they are either able to arrive at an agreement as to what is to happen or that they cannot do so, in default of which I will relist the matter on 28 May 2012 to decide what course should be followed.

56    For these reasons I am of opinion that unless limitations are placed on the parties so as to ensure that the hearing fixed for 4 June 2012 will finish before me in the eight weeks allotted, the parties should be required either to consent to a reference that can begin and run from then or I will vacate the fixture and set the matter down for a trial that will commence on or about 29 January 2013 and run to its conclusion.

Associate:

Dated:    8 June 2012

SCHEDULE

NSD 681 of 2009

TIBRA TRADING PTY LTD

First Respondent

TIBRA CAPITAL PTY LTD ACN 120 313 160

Second Respondent

TIBRA INVESTMENT MANAGEMENT LTD ACN 124 402 160

Third Respondent

TIBRA GLOBAL SERVICES PTY LTD ACN 120 338 445

Fourth Respondent

DINESH BHANDARI

Fifth Respondent

GLENN WILLIAMSON

Sixth Respondent

TIMOTHY BERRY

Seventh Respondent

ANDREW KING

Eighth Respondent

KINSEY COTTON

Ninth Respondent

MARTIN NICKOLAS

Tenth Respondent

NICHOLAS BEGG

Eleventh Respondent